About 10 years ago, I was in my early 20s and wanted to learn as much as I could about investing. Conveniently, a library down the street from my apartment hosted a weekly meetup on Saturday mornings where people could drop in and talk about their portfolios.
I have a vivid memory from one of these meetings during which multiple members of the stock club started touting the potential of blockchain technology. For reference, this period coincided with alternative investments such as crypto (mostly Bitcoin) starting to break onto the scene.
My takeaway from this particular meeting was that many of the investors in our group enjoyed hyping blockchain and crypto, but essentially nobody could actually talk about these things in detail. This was my first time experiencing how psychology can affect the way people make investment decisions.
While connecting dots that aren't necessarily there isn't anything new, I tend to caution investors from following this style of investing. At the moment, one pocket of the artificial intelligence (AI) realm that is experiencing a lot of momentum is quantum computing.
Below, I'm going to explain in detail what is going on in the world of quantum computing. From there, I hope you'll have a better idea of whether or not this is the next millionaire-maker opportunity in AI.
The rise (and fall) of quantum computing stocks
The chart below illustrates stock price movements for a number of quantum computing businesses. It's startling how similar the trends are among this cohort of four companies. For months, all of them were penny stocks -- only to witness outsize price increases toward the end of 2024, and more recently, sharp declines.
Personally, when I see synchronicity of this magnitude I tend to think that the volatility is coordinated. In other words, I don't buy into the idea that four quantum computing penny stocks all achieved notable milestones around the same time, thereby leading to increased buying activity.
Rather, I think sophisticated investors took note of the rising enthusiasm surrounding the idea of quantum computing and decided to take some large positions in speculative opportunities. As I often express, I think investing in momentum stocks is usually best avoided.
It's nearly impossible to know when the momentum could stop and a stock could come crashing down. In the case of D-Wave, Quantum Computing, IonQ, and Rigetti Computing, comments from Nvidia Jensen Huang hinting that quantum computing technology is still several years away from becoming useful drove the recent sell-off.
As the chart above illustrates, the majority of people who actually made considerable profits investing in these quantum computing stocks were day traders and short-sellers. Neither one of these methodologies is considered prudent for most investors.
Image source: Getty Images.
If you want to make money investing in quantum computing, look to big tech
As surprising as it may sound, I think investing directly into quantum computing stocks is not the way to play this opportunity. Rather, I would suggest looking to big tech companies such as IBM, Microsoft, Alphabet, or any number of chip stocks such as Nvidia, Advanced Micro Devices, or Micron Technology.
NASDAQ: NVDA
Key Data Points
IBM, Microsoft, and Alphabet are all exploring ways in which quantum computing can augment their respective AI endeavors. However, none of these companies is dependent on quantum computing to shape their long-term potential.
To me, all of these big tech and chip stocks have the potential to make you a millionaire, but quantum computing is only one opportunity in a long line of AI-driven tailwinds each of these companies has. By taking positions in more diversified businesses, you inherently gain exposure to many different pockets of the AI landscape and are not as exposed or vulnerable to just one opportunity.
